But NIyi Jacobs
Gombe and Enugu states top the list of Nigerian states where the majority of businesses operate without formal registration, highlighting the persistence of informality in the country’s economy.
According to a recent report by the Fate Institute, an estimated 99% of businesses in both Gombe and Enugu are not registered with the Corporate Affairs Commission (CAC), the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), or recognized trade associations.
Other states with high rates of unregistered businesses include Abia at 96%, Taraba at 91%, and Cross River at 87%. Nasarawa and Sokoto each recorded 84%, while Imo, Delta, Ekiti, Osun, and Zamfara ranged between 79% and 70%, far exceeding the national expectations for formal business registration.
The report underscores a longstanding challenge for Nigeria’s economic development, as unregistered businesses often operate outside regulatory oversight, limiting access to credit, insurance, and government support schemes.
Experts warn that the high prevalence of informal enterprises constrains tax collection, reduces employment data accuracy, and makes it difficult for policymakers to implement effective economic policies.
According to the Fate Institute, unregistered businesses are concentrated in sectors such as small-scale retail, artisan services, and micro-trading, which dominate local economies in both urban and rural areas.
While these businesses contribute significantly to livelihoods, their informal status prevents them from participating fully in Nigeria’s formal financial system.
Economists argue that encouraging formal registration could unlock access to loans, grants, and digital financial services, enhancing productivity and competitiveness. However, barriers such as bureaucratic processes, high registration fees, and lack of awareness continue to deter many entrepreneurs from formalizing their operations.
The report also points to regional disparities: most states with high informal business activity are located in the North East, South East, and South South zones, reflecting varying levels of infrastructure, governance, and economic development.
In response, policymakers and business advocacy groups have called for streamlined registration processes, public awareness campaigns, and incentives for small businesses to enter the formal sector.
“Formalization is not just about compliance,” said an industry expert, “it’s about giving entrepreneurs access to opportunities that can grow their businesses and contribute to the nation’s economy.”
As Nigeria seeks to diversify its economy and improve revenue generation, addressing the informal business sector’s dominance remains a critical step toward building a robust, inclusive, and accountable economic landscape.
